Costly Pills Put Financial Burden on Health Systems

The new Sovaldi hepatitis C drug, which has a wholesale cost of $1,000 a pill, will pose a challenge to Medicare, Medicaid and prison systems during a time of austere budgets.

Sovaldi’s price already has sparked controversy among activist groups and could, in time, accelerate serious debate about how federal and state agencies buy medicines. Advocates for people with hepatitis C have welcomed Sovaldi as a true medical breakthrough while decrying the high price that its owner, Gilead Sciences Inc., intends to charge.

Gilead has said that a 28-pill bottle of Sovaldi will have a wholesale cost of $28,000, or $1,000 a pill. Many patients will take the drug for 12 weeks, or 84 days; such a course of Sovaldi would cost $84,000.

Sovaldi is seen as a leader in an expected new wave of drugs with the potential to replicate some of the rarest victories in medical science, the near total containment of a disease.

“We’ve got the first of many tools that will allow us to seriously have the discussion about eradicating hepatitis C,” said Michael Ninburg, executive director of the Hepatitis Education Project in Seattle. “In the next few years, there will be very few people living with hepatitis C who won’t be able to be cured by taking a pill, or a couple of pills, a day for 12 weeks, or in some cases maybe a little bit longer.”

The Food and Drug Administration called Sovaldi a “significant shift” in how hepatitis C will be treated. It can be used for some patients without requiring a combination of interferon injections, which are known to frequently cause side effects.

Sovaldi was the third medicine to win the FDA’s relatively new designation as a breakthrough therapy, meaning that it’s considered a substantial improvement over available treatments for a serious and potentially fatal condition.

The FDA noted in a news release that Sovaldi worked for some people who couldn’t tolerate interferon, although the new pill will be combined with injections of the older drug for some patients in other regimens. It’s intended to be taken with the generic pill ribavirin.

“It’s absolutely to be applauded,” Ninburg said. “The price, on the other hand, is an issue.”

It’s certainly a problem for government health programs. Officials at the Federal Bureau of Prisons warned Congress last year about an expected spike in the cost of treating inmates infected with hepatitis C, also called HCV, due to the introduction of new, more expensive medicines.

“More patients will be candidates for treatment and drug regimens will become more and more expensive,” the bureau said in its fiscal 2014 budget request to Congress. “As treatment indications broaden in the future and multi-drug regimens become the standard of care, the drug costs for managing HCV will grow significantly.”

Prisons host a disproportionate share of people infected with hepatitis C, according to the Centers for Disease Control and Prevention. About 3.2 million people in the United States have chronic hepatitis C, meaning that their bodies didn’t clear the liver-damaging virus on their own without treatment. The infection is primarily linked to a history of injections of illegal drugs, such as heroin, although it can be transmitted in other ways.

About 12 percent to 35 percent of inmates are chronically infected with hepatitis C, compared with 1 percent to 1.5 percent of the population outside of prisons, the CDC said. The infection can sometimes cause people to need costly organ transplants.

As it stands now, the bureau spends $4 million a year on testing for hepatitis C. More than 11,000 inmates with the infection have been identified, most of whom have not been treated yet, the bureau said.

The current course of therapy, which costs about $6,600, lasts for 48 weeks and includes injections of interferon. Many would-be patients don’t have enough time on their sentences to complete the full course by the time the treatment is offered.

When the budget request was submitted, there were two recently introduced pills — Merck & Co.’s Victrelis and Vertex Pharmaceuticals Inc.’s Incivek — that could be added to a combination of interferon and ribavirin.

“These newer agents are very expensive and could add $20,000 to $40,000 to the cost of treating one patient,” the bureau said.

Now, more expensive drugs have arrived. The Fair Pricing Coalition, which lobbies on behalf of people with HIV and hepatitis C, in November protested against the expected $66,000 price for a course of treatment with Johnson & Johnson’s recently approved Olysio hepatitis C drug. Now the Bureau of Prisons is facing the potential tab for that, plus Sovaldi.

“They dodged a bullet with the old medicines, but now the marketplace will have new, more expensive medicines with a much shorter course of treatment,” Anne Spaulding, an Emory University researcher who has studied HIV and hepatitis C in prisons, said in an interview.

In a recent paper, she and other researchers suggested modifying the current rules on the federal 340B drug discounting program, which could open the way for more prison systems to participate.

Having deeper discounts on drugs would make it easier for prison systems to manage the cost of the new wave of hepatitis therapies. For now, the requirements associated with the 340B program, such as the need for an entity other than the prison to have control of the medical records of covered patients, have prevented many states from trying this option, Spaulding said.

“Hepatitis C treatment has a high price tag,” she said. “Prisons don’t want to pay the high price tag up front when they will not recoup the downstream benefits of avoiding the expensive treatment for end-stage liver disease.”

A change in Medicare policy also could spur demand for Sovaldi. The agency appears likely to act on a June 2013 recommendation from the U.S. Preventive Services Task Force, which advocated for a one-time screening for hepatitis C in people born between 1945 and 1965.

About 2.1 million of those infected with the disease in the United States are baby boomers, with perhaps 1.5 million unaware that they have this condition, according to the CDC. Many may have contracted it before 1992, when screening began of blood donations for the hepatitis C virus. Getting these people appropriate care and treatment could prevent more than 120,000 deaths.

There could be a quick uptake of Sovaldi in the United States, according to a December report from Phil Nadeau, a biotechnology analyst with Cowen and Company. He said that as many as 50,000 people could be treated in the United States with Sovaldi in 2014 alone, helping drive global sales of the drug to $3 billion for the year.

The haggling currently allowed for drugs in the United States in private plans and some Medicaid plans could lower the price for treatment with Sovaldi to about $70,000 a patient for a 12-week course.

Medicaid programs may also be another major market for Sovaldi and the newer hepatitis drugs.

A study presented in May at one of the world’s largest gatherings of liver specialists, known as Digestive Disease Week, found the rate of hepatitis C infection was more than twice as high among people on Medicaid compared with those with private insurance, with 663 cases for every 100,000 people on the state-federal health program and 302 for every 100,00 in the other group. People in the Medicaid group also were less likely to have had treatment for hepatitis than those with private health insurance, 20 percent versus 27 percent.

“The development of interferon-free regimens may increase eligibility for treatment,” concluded the paper, whose lead writer was an employee of the drugmaker AbbVie, which is developing a competitor pill to Sovaldi.